Tuesday, February 25, 2014

WWE looks to break its own mold with new network

With a new network, World Wrestling Entertainment is grappling with its own longtime business model and entering the busy world of streaming TV ready to rumble.

WWE Network launches Monday morning (9 a.m. ET), and instead of being a traditional ad-supported cable network or a Netflix-like on-demand subscription service, its immediate goal is to be both for its rabid pro-wrestling fan base.

The NFL and Major League Baseball have networks, "so why wouldn't we have our own?" WWE CEO Vince McMahon says. "You just need to be able to do it at the right time and in the right way, and I think we have that."

Priced at $9.99 per month (with a six-month commitment), younger fans of such current stars as John Cena and Daniel Bryan who are savvy in social media, as well as older viewers from the days of Ric Flair and Harley Race, will have more than 1,000 hours of digitized content to dive into, including high-profile matches and pay-per-view events going back more than 30 years, including the first WrestleMania from 1985.

"With your work done in the ring, you have the ability to live as long as the network is around," Cena says. "It hopefully immortalizes some of these superheroes we've had in (the) past, present and future."

WWE Network delivers, especially for "our fans who really want to go back in time in those moments that are really iconic for them," says Perkins Miller, WWE's executive vice president of digital media.

The network will also carry a 24/7 live feed of programming, including the in-ring WWE NXT show with up-and-coming talent, pre- and post-shows for its Monday Night Raw programming on USA Network, and series focusing on past story lines and personalities.

Starting Monday, WWE Network is available via app on a variety of devices at launch, including Roku, PlayStation 3 and 4, Amazon Kindle Fire, Xbox 360, Android and iOS devices. A second phase later this year will expand to Xbox One, smart TVs and streaming Blu-ray players.

All the connectivity fits! with the WWE's emphasis on social media, too. A "second-screen experience" via the WWE app will allow fans to tweet and interact with others while watching live content in addition to other features, such as "pop-up" historical factoids and background information on wrestlers.

One major goal of the network: persuading lapsed fans to return to the fold. To get them, WWE is bringing back 1980s icon Hulk Hogan to be a host at WrestleMania 30 on April 6 and have a role in the WWE Network, plus presenting shows such as WWE Legends' House in April — with such former stars such as "Rowdy" Roddy Piper and "Hacksaw" Jim Duggan — and digging into its 130,000 hours of "legacy" material that dates to the 1950s.

The boldest move overall, however, is WWE's plan to include monthly pay-per-view events as part of the network subscription price and air them on the live feed, starting with WrestleMania XXX. It's a huge cost savings for fans — Sunday's WWE Elimination Chamber event alone on various cable and online providers ranged from $44.99 to $54.99.

Between Raw on USA Network, Syfy's Smackdown, E! channel's Total Divas and other programs, 15 million fans watch WWE content every week, but only a small subset are watching the pay-per-views, says Michelle Wilson, WWE's chief revenue and marketing officer.

"The economics were just tough. Not enough of our fans want that on their monthly cable or satellite bill," she says. "We believe that our most premium live content will now get to a much bigger base."

Since an average 800,000 to 1 million homes will buy two to three pay-per-views a year — generating $50 million to $60 million domestically in revenue — WWE Chief Strategy and Financial Officer George Barrios figures the break-even point compared with the old model is 1 million subscribers.

If that number ends up being 2 million or 3 million, he says, there's potentially as much as $150 million in incremental OIBDA profits . "It's a game-changer for us if it works," Barrios ! says.(OIB! DA stands for operating income before depreciation and amortization.)

Financial analyst Robert G. Routh, director of equity research for National Alliance Capital Markets, thinks WWE is conservative with those numbers. Given the price point and fan base, he says, "ultimately, they could have close to double-digit subscribers."

The biggest risk is if the network's launch is "flaky," Routh adds. Otherwise, live attendance won't be affected, sales of ancillary products could increase, and countries internationally where WWE has never played before will now be exposed to it.

"It expands the market way above the 53 million estimated United States fans of the WWE to a global fan base and gives them access to this content that they never really had."

It's a no-brainer for even casual viewers from a consumer standpoint, but some are having issues wrapping their heads around the network.

In January following the announcement of the WWE Network, DirecTV released a statement: "Clearly, we need to quickly re-evaluate the economics and viability of their business with us."

Dish Network decided not to offer Elimination Chamber this past weekend, stating on its Facebook page that "we need to refocus our efforts to support partners that better serve Dish customers."

The company has fans who will sign up, but "WWE cannot run this profitably and prosper with these events unless they have their normal traditional TV partners," says Phil Swann, CEO of TVPredictions.com.

"If you're bringing money in the front door through streaming but it's going out the back door through pure opportunities to sell to cable and satellite guys, what have you gained?" Swann says.

McMahon is quick to point out that he's not advocating "cutting the cord" with any of WWE's TV partners. (Its current network deal with NBC Universal is up at the end of September, and WWE is currently negotiating with "interested parties," Barrios says.)

The network "shouldn't be a threat to anyone whatsoev! er. It sh! ould be an addition," McMahon says. "There might be a threat in terms of, hey, if WWE's successful, what else is coming down the pike?"

It could be a "trailblazing" moment for WWE and one of cultural significance, says David Shoemaker, who writes about wrestling for Grantland.com and is author of The Squared Circle: Life, Death, and Professional Wrestling.

"It really can open up WWE to a whole range of fans," Shoemaker says. "Who knows what the media landscape's going to look like in 10 years, but the notion of a lot of different companies on WWE's level having this sort of network as their primary point of access is definitely likely."

What's most important to McMahon in all of this is giving the fans their money's worth and earning their respect, be it the WWE faithful or someone who hasn't watched wrestling for decades.

"Other than being a doctor or a scientist who cures some dreaded disease, when you put smiles on people's faces the globe over, this is the best thing in the world," McMahon says.

With WWE Network, "our younger audience is going to find out the Bruno Sammartinos and the Ivan Koloffs," McMahon says. "It's such a rich experience, it's going to be difficult pulling people off this channel."

Adds Cena: "It's pretty much the library of the history of everything. It really is the way WWE was meant to be enjoyed."